@kwerb 1/ Well said @kwerb. When I started writing in 2016 abt the dangers of leverage-based financialization in #bitcoin mkts for @ForbesCrypto, I was worried abt #WallSt banks bringing it. What I missed was that #crypto peeps wld beat the big banks to it—& wld do it MUCH bigger. How?
@kwerb @ForbesCrypto 2/ bc they did it offshore. They beat #WallSt to it bc (1) regulators held back big banks/regulated derivatives exchanges & (2) onshore firms are capped on leverage they can offer. Example: onshore US #BTC futures can be leveraged ~2.5x but offshore can be 20x (was 125x until…
@kwerb @ForbesCrypto 3/ …some offshore exchanges voluntarily reduced it to 20x after much criticism of the practice—deserved, IMHO—but 20x is still much higher than regulators would allow onshore). The recent bull market brought in many speculators (incl many w/ WallSt trading backgrounds). I’d…
@kwerb @ForbesCrypto 4/ …encourage everyone to go back & read these 2016 articles, as well as the writings of early #bitcoiners on this topic. Paraphrasing @aantonop—there’s no real benefit to leveraging a disinflationary asset (risk/reward is backwards). Paraphrasing @NickSzabo4—liquidity is a…
@kwerb @ForbesCrypto @aantonop @NickSzabo4 5/ …nice to have but not a must have for #bitcoin. And @TraceMayer—#notyourkeysnotyourcoins. Also, read your Mises. Understand the difference btwn commodity credit & circulation credit. Commodity credit is healthy, but circulation credit—which creates more paper claims to…
@kwerb @ForbesCrypto @aantonop @NickSzabo4 @TraceMayer 6/ …the asset than the true quantity of the asset that exists—is not. And #bitcoin trading mkts are filled w/ circulation credit, in many forms, just like traditional mkts are.
But remember—#bitcoin itself (the asset) is immune to all this. Leverage just affects its price…
But remember—#bitcoin itself (the asset) is immune to all this. Leverage just affects its price…
@kwerb @ForbesCrypto @aantonop @NickSzabo4 @TraceMayer 7/ …but does not affect the actual on-chain asset. Will there be runs on leveraged #crypto intermediaries? Yep (already have been; more will come). Will there be enormous short squeezes? Yep (already have been; more will come). And true #HODLers will not only be just fine, but…
@kwerb @ForbesCrypto @aantonop @NickSzabo4 @TraceMayer 8/ …will win from all this by being there to scoop up the real, on-chain #bitcoin when its price swoons from unhealthy trading market dynamics. Nobody can make more than 21m of those real on-chain #bitcoin, after all, & that’s what matters most. 👊
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